The Recession and US Museums

March 11, 2009, The Art Newspaper — “That was then; this is now.” A blunt expression often used in negotiations when one party wants to make clear to the other that previously reasonable expectations are unlikely to be met because of some adverse and unalterable change in circumstances. It is an expression that the cultural sector’s leadership is likely to hear frequently over the next few years as it seeks to navigate a radically changed economic and political map. The global recession that we have entered will not just knock the froth off things; it will permanently reconfigure the cultural landscape. This may happen more slowly and the events may be less flamboyantly newsworthy than the bankruptcy of Iceland, the collapse of the international banking system or the failure of the American mortgage industry, but the underlying forces at work are just as strong—indeed, they are the same forces.

This observation is hardly revelatory. The past five years of the decade-long upswing of the art market—predominantly the contemporary art market—has been largely speculative in nature, and the market correction that we are experiencing has been predicted by most parties who do not have a vested interest in the prolongation of the bubble: a period of declining volumes and prices and a shrinking of the market’s entire infrastructure—galleries, auction houses, art fairs and ancillary publications, and public relations. (In February, Standard & Poor’s gave Sotheby’s a credit rating of BBB, for example.) The scale and duration of the contraction will be directly related to the scale and duration of the wider recession. The art market trails the economy—as a whole reluctantly, but obediently. To give some indication of what’s ahead, the last time the art market experienced a major slump followed the 1987 stock-market crash. The art market fell later but further than the stock market, finally hitting bottom in 1993, with prices falling 56% on average. The market was thinner then, and therefore more volatile, but the current recession is broader and deeper, and likely to last longer; and the fall is from a higher speculative peak.